An Overview of Traditional Finance

An Overview of Traditional Finance - • Value...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
A N O VERVIEW OF T RADITIONAL F INANCE THE KEY Q UESTIONS 1. How do we determine financial return for investments? 2. How do we determine the return we require for an investment? The cost of waiting The cost of risk 3. How do we put a value on money received later? Lump sums Periodic payments 4. How much do we increase the discount rate for higher risk? Risk vs. return (The CML) The role of diversification Return of non-diversifiable assets (The CAPM, beta, and the SML) 5. How smart are financial markets? 6. Practically speaking, what can we do with this stuff?
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: • Value assets (stocks, bonds) • Value projects (capital budgeting) Looking back, the important implicit assumptions are: • Large, publicly owned businesses • Diversified investors • Efficient markets at equilibrium • Psychic rewards are ignored BUT…. .sports organizations differ: • are small and privately owned • have owners who are under-diversified • operate in inefficient markets • are driven by significant psychic rewards...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online